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Here's How Much Soaring Health Care Prices Have Cost American Workers

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By Michael Rainey

October 11, 2018

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It’s not news that health care costs have been rising for years, but a new report from Josh Bivens of the Economic Policy Institute puts some eye-opening numbers on just how much the rising price of health care has cost American workers.

“Rapid growth in the cost of U.S. health care has put sustained downward pressure on wages and incomes,” Bivens writes, with workers losing out as employers spend more compensation dollars on insurance coverage and as families are required to spend more and more on premiums, deductibles and copays.

By the numbers: Between 1999 and 2016, the total cost of employer-sponsored insurance premiums rose from $5,791 to $18,142. Over a longer time period, between 1960 and 2016, the money employers spent on premiums rose from about 1 percent of employee compensation to more than 8 percent.

What if health care costs had remained stable? In his analysis, Bivens found that:

If employer-sponsored health insurance costs had remained stable at 1999 levels, measured as a percentage of income, individual earnings for the bottom 90 percent of wage earners would have been 8.6 percent higher in 2016 – or $4,239.

For families, incomes would have been 26.1 percent higher – or $12,350 – in 2016 if health care costs had remained at 1999 levels.

The increasingly obvious culprit: While experts have debated the ultimate cause of the decades-long American health care cost spiral – in which the country as a whole pays far more than its peers for care that is of equal or lower quality – Bivens joins a growing chorus of critics who put their finger on one variable to explain the soaring costs: rising prices. Put simply, soaring health care costs are driven by relentlessly rising prices – for physicians, for drugs and for medical procedures.

Significantly, American doctors earn far more than physicians in peer countries, Bivens notes. For example, American orthopedists earn more than twice what their counterparts in France do, according to international comparative data.

Overall, data cited by Bivens from the International Federation of Health Plans Comparative Price Report found that prices for key medical goods and services were roughly twice as high in the U.S. as in other advanced nations.

How to control costs: Bivens concludes that the only way to reduce the rate of growth in health care costs is to gain control over health care prices. Here’s a list of his policy proposals:

Expand public health insurance options.

Strengthen Medicare’s ability to set prices across the health care system.